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THE  DRIFT  TOWARD  GOVERNMENT  OWNERSHIP 

OF  RAILWAYS 


BY 


B.  L.  WINCHELL 


[Reprinted  from  the  Atlantic  Monthly  for  December,  1912.] 


THE   ATLANTIC    MONTHLY    COMPANY,   PUBLISHERS 
4  Pabk  Street?,  Boston.  MASsACHUsims 


THE  DRIFT  TOWARD   GOVERNMENT  OWNERSHIP 

OF  RAILWAYS 

BY    B.   L.    WINCHELL 


There  is  an  unmistakable  drift 
toward  government  ownership  of  rail- 
ways in  the  United  States.  This  ten- 
dency is  probably  most  apparent  to 
those  closely  identified  with  railway 
affairs;  but  it  is  also  evident  to  many 
who  are  interested  in  the  railway  busi- 
ness chiefly,  or  only,  as  observers  and 
students  of  economic,  industrial,  and 
political  problems. 

In  the  first  place,  there  has  been  for 
some  years  a  rather  unsteady  but  cer- 
tain increase  in  the  number  of  socialists 
in  the  country;  and  those  who  thus  fa- 
vor public  ownership  and  management 
of  all  of  the  means  of  both  production 
and  distribution  must  be  counted  in 
with  those  others  who  favor  public 
acquisition  of  the  principal  means  of 
distribution.  There  has  also  been  an 
increase  in  the  number  of  those  who 
advocate  public  ownership  of  all  public 
utilities,  of  which  steam  railways  are 
the  largest.  Finally,  there  has  been  a 
mighty  growth  in  the  number  who  favor 
very  stringent  regulation  of  railways, 
and  who  have  succeeded  in  getting  this 
policy  adopted.  The  last-named  class, 
which  is  much  the  largest,  may  finally 
turn  the  scale  for  public  ownership. 
For  its  members  now  expect  much  from 
regulation —  lower  rates,  better  service, 
smaller  railway  dividends,  complete 
elimination  of  traffic  discriminations, 
shorter  hours  and  higher  wages  for 

746 


labor,  higher  railway  taxes,  fewer  acci- 
dents, and  all  the  rest. 

There  is,  however,  a  limit  to  the 
amount  along  these  lines  that  any  rail- 
way policy,  whether  that  of  unreg- 
ulated private  management,  regulated 
private  management,  or  public  man- 
agement, can  accomplish.  It  is  to  be 
feared  that  public  regulation,  however 
submissive  to  it  the  railways  may  be, 
will  accomplish  less  than  many  expect; 
and  that,  disappointed,  these  will  join 
the  ranks  of  those  who  believe  in  gov- 
ernment ownership. 

Furthermore,  the  opposition  to  pub- 
lic ownership  from  the  men  who,  in  past 
years,  have  had  the  strongest  incent- 
ive to  oppose  it,  namely,  the  officers 
and  stockholders  of  railways,  may  de- 
crease— nay,  is  decreasing — just  when 
the  tendency  toward  it  becomes  strong- 
est. Whether  rightly  or  wrongly,  many 
railway  officers  and  stockholders  feel 
that  unless  present  tendencies  of  regu- 
lation are  checked,  the  time  will  soon 
come  when,  regardless  of  what  their 
attitude  as  citizens  may  or  should  be, 
they  will  have  no  good  reason,  as 
railway  officers  and  stockholders,  for 
opposing  public  ownership. 

The  main  thing  about  any  employ- 
ment that  makes  it  attractive  to  strong 
men  is  the  opportunity,  under  condi- 
tions affbrding  much  freedom  of  action, 
to  exercise  their  best  initiative,  put 
forth  their  best  energy,  and  thereby 
achieve  the  best  results  of  which  they 


GOVERNMENT  OWNERSHIP  OF  RAILWAYS 


747 


are  capable;  and  many  railway  officers 
feel  that  the  ever-increasing  restrictions 
that  regulation  is  putting  on  railway 
management  are  depriving  them  of  this 
opportunity.  The  public  has  small  con- 
ception how  the  hundreds  of  federal 
and  state  laws  regulating  railways, 
passed  in  recent  years,  and  the  innum- 
erable orders  that  are  constantly  being 
issued  by  the  Interstate  Commerce 
Commission  and  the  forty-two  state 
commissions,  tie  the  hands  of  railway 
officers.  Doubtless  much  of  the  regu- 
lation is  needed;  perhaps  all  of  it  is 
well  intended:  but  the  public  has  un- 
fortunately tried  to  adopt  a  policy  of 
regulation  that  will  prevent  railway 
officers  from  doing  anything  that  they 
ought  not  to  do,  and  has  overlooked 
the  fact  that  to  hedge  men  about  with 
restrictions  of  this  sort  may,  at  the 
same  time,  so  narrow  their  freedom  of 
action  as  to  make  it  impossible  for 
them  to  do  many  things  that  they 
ought  to  do. 

Those  who  have  bought  railway 
stock  —  as  distinguished  from  those 
who  have  really  loaned  their  money  to 
the  roads  by  buying  their  bonds  — 
have  done  so  in  order  that,  while  incur- 
ring the  risk  of  business  loss  if  the  ven- 
ture did  not  pay,  they  might  get  a 
business  profit  if  it  did  pay;  and  the 
tendency  of  regulation  to  limit  and 
reduce  railway  profits  is  making  many 
investors  wonder  if  they  would  not  be 
better  off  financially  if  government  ^ 
ownership  should  be  adopted.  With  an 
outstanding  capitalization  of  less  than 
$63,000  a  mile,  or  lower  than  that  of 
the  railways  of  any  other  first-rate 
country  in  the  world,  the  railways  of 
the  United  States  have  never  been  able 
in  any  year  to  pay  as  much  as  4  per 
cent  on  both  their  bonds  and  their 
stock.  In  1910  their  average  interest 
was  3.79  per  cent  and  their  average 
dividends  3.64  per  cent.  It  is  in  the 
face  of  this  fact  that  the  state  and 


national  governments  are  pursuing  a 
policy  under  which  net  earnings  are 
declining  instead  of  increasing.  In  the 
calendar  year  1907,  net  earnings  per 
mile  were  $3,359;  in  1908,  following 
the  panic  of  1907,  they  were  $2,869; 
in  1909,  $3,441;  in  1910,  $3,344;  in 
1911,  $3,152.  Now,  railway  stockhold- 
ers know  that  no  government  has 
ever,  in  acquiring  railways,  paid  an  im- 
properly low  price  for  them;  they  feel 
confident  that  the  government  of  the 
United  States  will  not  be  the  first  to  set 
the  example  of  railway  confiscation; 
and  if  they  could  get  their  money  out 
of  railways  they  could  invest  it  else- 
where with  more  chance  of  large  profits. 

In  these  circumstances,  the  time 
may  soon  come  when  the  only  persons 
who  will  oppose  public  ownership  will 
be  those  who  will  do  so  solely  from  a 
disinterested  belief  that  it  would  be  a 
bad  thing  for  the  republic,  and  we  all 
know  that  disinterested  zeal  is  seldom 
active,  strenuous,  and  effective. 

A  change  to  government  ownership 
in  the  United  States,  whether  the  re- 
sults were  bad  or  good,  would  be  a 
revolution  of  stupendous  proportions. 
The  mileage  of  the  railways  of  this 
country,  amounting  to  more  than 
240,000  miles,  is  greater  than  the  com- 
bined mileages  of  all  the  railways  now 
owned  by  governments  in  the  world. 
The  net  capitalization  of  our  railways 
is  about  fourteen  and  a  half  billions  of 
dollars;  they  certainly  could  not  be 
acquired  for  less  than  this;  the  purchase 
price,  very  likely,  would  be  nearer 
twenty  billions;  and  all  this  immense 
sum  would  be  added  to  the  national 
debt.  The  1,700,000  employees  would 
all  become  government  employees,  with 
what  political  consequences  no  one  can 
foretell.  We  should  arouse  ourselves 
to  a  clear  recognition  of  present  tend- 
encies, cease  drifting,  and  determine 
by  investigation,  thought,  and  discus- 
sion  whether   government  ownership 


257171 


748 


GOVERNMENT  OWNERSHIP  OF  RAILWAYS 


will  or  will  not  be  the  best  policy  for 
us  as  a  people;  and  then,  having  de- 
cided this,  we  should  deliberately  and 
carefully  either  prepare  for  the  change, 
or  work  out  and  adopt  a  railway  policy 
that  will  steer  us  clear  of  it. 


n 

The  first  question  to  be  squarely 
faced  and  settled  is:  Is  government 
ownership  desirable  or  not?  To  discuss 
that  question  adequately  within  the 
limits  of  a  magazine  article  would  be 
impossible.  Some  of  the  most  import- 
ant points  may,  however,  be  touched 
upon. 

The  largest  state-owned  railway  sys- 
tem in  the  world  is  that  of  Germany, 
and  its  results  are  those  most  frequent- 
ly cited  by  advocates  of  government 
ownership  as  arguments  for^that  policy. 
It  is  said  that  the  German  state  system 
yields  large  profits  to  the  government, 
that  its  rates  are  reasonable  and  non- 
discriminatory, and  that  its  service  is 
good.  There  is  no  question  that,  on 
the  whole,  the  German  state  lines  are 
quite  well-managed.  But  there  is  one 
vital  difference  between  Germany  and 
the  United  States  that  must  be  taken 
into  account.  Germany  is  a  monarchy; 
the  United  States  is  a  democracy;  and 
Charles  Francis  Adams,  long  chairman 
of  the  Railroad  Commission  of  Massa- 
chusetts, thirty  years  ago  forcibly  ex- 
pressed the  reasons  why  the  results 
gained  by  public  management  of  rail- 
ways under  one  form  of  government 
cannot,  without  much  qualification 
and  many  reservations,  be  used  as  an 
argument  for  the  adoption  of  the  same 
policy  in  a  country  having  a  different 
form  of  governitient. 

'  In  applying  results  drawn  from  the 
experience  of  one  country  to  problems 
which  present  themselves  in  another,' 
said  Mr.  Adams,  'the  difference  of 
social  and  political  habit  and  educa- 


tion should  ever  be  borne  in  mind. 
Because  in  the  countries  of  continental 
Europe  the  state  can  and  does  hold 
close  relations,  amounting  even  to 
ownership,  with  the  railroads,  it  does 
not  follow  that  the  same  course  could 
be  successfully  pursued  in  England  or 
in  America.  The  former  nations  are 
by  political  habit  administrative,  the 
latter  are  parliamentary.  In  other 
words,  France  and  Germany  are  essen- 
tially executive  in  their  governmental 
systems,  while  England  and  America 
are  legislative.  Now,  the  executive 
may  design,  construct,  or  operate  a 
railroad;  the  legislative  never  can.  A 
country,  therefore,  with  a  weak  or 
unstable  executive,  or  a  crude  and  im- 
perfect civil  service,  should  accept 
with  caution  results  achieved  under  a 
government  of  bureaus.' 

As  W.  M.  Acworth,  the  English 
railway  economist,  has  said,  'Prussia 
is  Prussia,  with  a  government  in  effect 
autocratic,  with  a  civil  service  with  a 
strong  esprit  de  corps,  and  permeated 
with  old  traditions,  leading  them  to 
regard  themselves  as  servants  of  the 
king,  rather  than  as  candidates  for 
popular  favor.  I  am  inclined  to  think,' 
Mr.  Acworth  adds,  'that  the  effect  of 
the  evidence  is  that  the  further  a  gov- 
ernment departs  from  autocracy  and 
develops  in  the  direction  of  democracy 
the  less  successful  it  is  likely  to  be  in 
the  direct  management  of  railroads.' 

Most  of  the  employees  of  the  Ger- 
man lines  are  ex-soldiers  who  not  only 
have  the  soldier's  training  and  tradi- 
tions, but  might  at  any  time  be  called 
into  military  service.  Suppose  that 
they  should  strike.  They  might  at 
once  be  ordered  into  the  army  and  then 
detailed,  as  soldiers,  to  return  to  their 
posts  on  the  railways;  and  if  they 
refused  they  might  be  tried  by  court- 
martial  and  shot.  The  employees  of 
the  German  state  lines  are  not  allowed 
to  organize  labor-unions  such  as  the 


GOVERNMENT  OWNERSHIP  OF  RAILWAYS 


749 


employees  of  the  privately-owned  rail- 
ways of  Great  Britain  and  the  United 
States  have.  They  may  form  local  as- 
sociations to  carry  on  discussion  and 
formulate  complaints  and  petitions  as 
to  wages  and  conditions  of  employ- 
ment; but  a  superior  officer  is  always 
present  at  these  meetings.  They  can 
present  their  complaints  or  demands 
to  Parliament  only  through  their  offi- 
cers, and  political  activity  on  their  part 
to  secure  anything  the  railway  admin- 
istration does  not  want  to  grant,  is  un- 
known, and  would  not  be  tolerated. 

These  facts  illustrate  the  differences 
between  the  conditions  under  which 
government  management  is  carried 
on  in  such  a  country  as  Germany,  with 
a  monarchical  government,  and  those 
under  which  it  would  be  carried  on 
under  a  democratic  government  such 
as  ours.  Can  any  one  believe  that  if 
government  ownership  were  adopted 
here  the  powerful  railway  brotherhoods 
would  be  abolished,  and  political  activ- 
ity by  employees  to  secure  such  wages 
and  conditions  of  employment  as  they 
wanted  would  be  prohibited?  If  we 
could  expect  this  to  be  done,  it  would 
be,  to  the  minds  of  railway  employees, 
a  powerful  argument  against  govern- 
ment ownership;  and  if  it  were  not 
done,  experience  indicates  that  the  re- 
sult would  be  the  bidding,  by  our  poli- 
ticians, for  the  votes  of  the  great  army 
of  railway  employees,  by  means  which 
would  be  ruinous  to  the  railway  serv- 
ice, and  bad  for  government,  for  the 
public,  and  in  the  long  run  for  the  em- 
ployees, '^o  American  citizen  doubts 
that  democratic  government  is  the 
best  form  of  government  for  protect- 
ing the  personal  and  property  rights 
of  the  citizen;  but  one  may  be  a  very 
patriotic  citizen  and  yet  be  sure  that 
democratic  government  is  a  very  bad 
form  for  managing  large  industrial  con- 
cerns. 

However,   while  all   must   concede 


that,  in  many  ways,  the  German  lines 
are  well  managed,  this  is  far  from  con- 
ceding that  they  are  managed  better, 
from  the  standpoint  of  the  interests  of 
the  public,  than  are  those  of  the  United 
States  under  private  ownership.  It  is 
true  that  their  net  earnings,  amounting 
in  1910  to  $229,368,256,  are  paid  into 
the  government  treasury;  but  after 
deducting  from  this  amount  interest 
at  3^  per  cent  on  the  cost  of  construc- 
tion there  is  left  only  $86,607,000. 
Professor  H.  G.  Moulton,  of  the  Uni- 
versity of  Chicago,  in  his  recent  book, 
Waterways  versus  Railways,  places  the 
clear  profit  from  the  Prussian  railways 
at  only  about  $57,000,000.  But  these 
figures  are  less  than  the  annual  taxes 
paid  by  the  railways  of  the  United 
States,  amounting  in  1911  to  about 
$110,000,000;  and,  of  course,  the  clear 
profits,  after  interest,  earned  by  state 
railways  are  no  less  and  no  more  a 
contribution  to  the  support  of  the  gov- 
ernment than  are  the  taxes  paid  by 
privately-owned  railways. 

Furthermore,  if  the  charges  to  oper- 
ating expenses  for  maintenance  on  the 
German  railways  were  as  generous  in 
proportion  as  are  the  similar  charges 
of  American  railways,  their  apparent 
net  earnings  would  be  less.  It  is  a 
general  practice  of  state  railways,  of 
which  those  of  Germany  have  not  been 
innocent,  to  present  as  good  a  show- 
ing as  possible  by  making  inadequate 
charges  to  maintenance,  and  then  to 
charge  to  capital  account  new  equip- 
ment really  acquired  to  maintain  the 
property,  thereby  swelling  the  capital 
account  and  the  amount  of  interest 
that  has  to  be  paid  on  it.  While  this 
makes  an  apparently  good  showing  for 
the  management,  it  is  the  opposite  of 
good  for  the  public  in  the  long  run,  and 
was  largely  responsible  for  an  increase 
of  $14,000  per  mile  in  the  capital  cost 
of  the  German  lines  between  1900  and 
1910. 


750 


GOVERNMENT  OWNERSHIP  OF  RAILWAYS 


The  freight  rates  charged  by  the 
German  railways  in  order  to  make  as 
good  a  financial  showing  as  they  do,  are 
higher  than  those  of  the  railways  of  the 
United  States,  averaging  14  mills  per 
ton  per  mile,  as  compared  with  7.5 
mills  in  this  country.  Their  average 
passenger  rate  is  lower,  being  only  9 
mills,  as  compared  with  19.3  mills  in 
the  United  States,  but  the  lower  aver- 
age in  Germany  is  due  to  the  fact  that 
a  large  proportion  of  passengers  there 
take  the  poor  and  low-priced  third- 
class  service.  For  the  first-  and  second- 
class  services,  which  are  comparable 
with  the  service  in  this  country,  the 
rates  are,  first-class,  3.45  cents  per 
mile;  second-class,  ^.55  cents.  It  must 
also  be  remembered  that  these  rates 
are  charged  on  railways  in  a  country 
where  the  wages  of  labor,  which  deter- 
mine both  the  cost  of  labor  to  the  rail- 
ways, and  the  amount  that  the  people 
who  work  for  wages  can  afford  to  pay 
for  transportation,  are  much  less  than 
in  the  United  States.  For  example,  the 
average  annual  wage  of  railway  em- 
ployees in  the  United  States  is  $673, 
while  in  Germany  it  is  but  $388.  There- 
fore, on  the  average,  a  day's  labor  will 
buy  almost  as  much  passenger  trans- 
portation in  the  United  States  as  it  will 
in  Germany  —  although  the  density  of 
passenger  traffic  is  about  four  times  as 
great  there  as  it  is  here  —  and  it  will 
buy  three-and-a-half  times  as  much 
freight  transportation  here  as  in  Ger- 
many. This  is  probably  the  best  test  of 
whether  the  railway  rates  of  a  country 
are  high  or  low,  for  in  the  long  run  the 
wage-earner,  as  consumer,  pays  freight 
as  well  as  passenger  rates,  and  it  shows 
that  the  rates  of  the  German  lines  are 
relatively  much  higher  than  those  of 
the  railways  of  the  United  States. 

To  summarize,  then:  the  privately- 
owned  railways  of  the  United  States, 
while  paying  their  interest  and  very 
moderate  dividends,  pay  wages  to  their 


employees  much  higher  than  those  of 
the  German  lines,  charge  rates  much 
lower,  and  at  the  same  time  turn  into 
the  public  treasury  in  the  way  of  taxes 
an  annual  sum  greatly  exceeding  the 
profit  derived  by  the  German  public 
from  its  railways. 


Ill 

Hardly  of  less  interest  than  the  rail- 
ways of  Germany  to  the  student  of 
state  management  are  the  railways  of 
Australia.  In  Australia  government  is 
as  near  pure  democracy  as  anywhere 
in  the  world;  and  here  the  troubles 
that  characterize  public  management 
of  industry  under  democratic  govern- 
ment were  long  experienced.  The  loca- 
tion of  new  lines  was  often  determined 
by  log-rolling  in  the  provincial  parlia- 
ments rather  than  by  consideration  of 
the  public  needs.  The  wages  of  em- 
ployees were  determined  rather  by  the 
relative  importance  of  the  men  as  voters 
than  according  to  economic  considera- 
tions. In  consequence  of  these  things 
most  of  the  lines  were  long  unprofitable. 

In  1903  the  labor  situation  came  to 
an  extraordinary  crisis  in  Victoria. 
Parliament  at  last  refusing  to  yield  to 
their  demands,  the  employees  struck. 
The  government  won.  The  question 
of  completely  disfranchising  the  rail- 
way employees  was  considered.  There 
was  at  last  passed  a  law  forbidding 
employees  of  the  state,  including  those 
on  railways,  under  heavy  penalties, 
from  taking  any  part  whatever  in 
politics  except  to  vote  for  members  of 
Parliament.  Their  unions  were  prac- 
tically broken  up.  To  free  the  railway 
management  from  political  interfer- 
ence, legislation  also  has  been  passed 
in  all  the  provinces  placing  the  con- 
trol of  operation  completely  in  the 
hands  of  permanent  non-political  rail- 
way commissioners,  instead  of  political 
ministers. 


GOVERNMENT  OWNERSHIP  OF  RAILWAYS 


751 


There  is  still  a  good  deal  of  politics 
in  the  railways,  however.  For  example, 
the  lower  house  of  the  New  South  Wales 
parliament  recently,  just  after  the  chief 
commissioner  had  started  on  a  long 
inspection  trip,  suddenly  passed  a  bill 
to  create  a  special  board  to  supervise 
the  work  of  double-tracking  some  of  the 
main  lines.  The  chief  commissioner, 
as  soon  as  he  heard  of  this,  entered  vig- 
orous protest  against  it  on  the  ground 
that  it  violated  the  principle  of  inde- 
pendent management.  As  a  result  of 
the  adoption  of  the  system  of  inde- 
pendent management,  —  which,  how- 
ever, is  temporary,  because  it  is  in  con- 
stant danger  of  political  attack,  —  the 
financial  results  of  the  railways  have 
been  better  in  recent  years  than  for- 
merly, when  they  commonly  did  not 
earn  enough  net  money  to  pay  the 
interest  on  the  investment.  In  all 
Australia  the  net  profit,  after  the  pay- 
ment of  interest,  averaged  during  the 
last  six  years  $244  per  mile  per  year; 
while  the  railways  of  the  United  States 
during  the  same  period  have  paid  $386 
per  mile  per  year  in  taxes,  or  almost 
60  per  cent  more.  In  1911,  the  most 
prosperous  year  in  the  history  of  the 
Australian  lines,  their  net  profits,  after 
payment  of  interest,  —  in  other  words, 
the  net  money  which  actually  could  be 
used  for  the  public  benefit,  — amounted 
to  the  unprecedented  sum  of  $7,000,000. 
This  was  $446  per  mile,  which,  by  an 
odd  coincidence,  is  exactly  the  amount 
per  mile  which  the  railways  of  the 
United  States  paid  in  taxes  in  the  same 
year. 

In  other  words,  the  governments 
and  public  of  the  United  States  de- 
rived just  as  much  direct  financial 
benefit  per  mile  from  the  railways  of 
this  country  under  private  ownership, 
as  did  the  Australian  public  from  its 
railways,  under  public  ownership,  in 
the  most  prosperous  year  in  the  Aus- 
tralian railways'  history. 


What,  now,  of  the  result  to  shippers, 
travelers  and  wage-earners?  In  New 
South  Wales,  which,  next  to  Queens- 
land, has  the  largest  mileage  in  Aus- 
tralia, and  where  very  full  figures  re- 
garding rates  and  wages  are  published, 
the  average  rate  per  passenger  per 
mile  in  1911  was  1.17  cents,  as  com- 
pared with  1.93  cents  in  the  United 
States,  and  the  average  rate  per  ton 
per  mile  was  18.2  mills,  as  compxared 
with  7.53  mills  in  the  United  States. 
The  average  railway  wages  per  year 
paid  in  New  South  Wales  were  $558, 
as  compared  with  $673  in  the  United 
States.  In  other  words,  on  the  average, 
a  day's  railway  wages  in  the  United 
States  will  buy  three  fourths  as  much 
passenger  transportation,  and  three 
times  as  much  freight  transportation, 
as  a  day's  railway  wages  in  New  South 
Wales. 

IV 

The  French  government  for  thirty- 
five  years  has  owned  and  operated  a 
railway  having  1860  miles  of  line.  A 
few  years  ago  it  acquired  also  the 
Western  Railway,  having  about  3700 
miles  of  line,  one  of  the  large  systems 
that  had  been  operated  by  private 
companies.  The  results  are  remarkable 
and  instructive.  In  the  last  year  of 
operation  by  the  company  (1908)  the 
gross  earnings  of  the  Western  were 
$43,520,000,  and  its  operating  expenses 
$29,700,000,  its  net  earnings  being 
$13,820,000,  and  the  ratio  of  its  oper- 
ating expenses  to  its  gross  earnings  68 
per  cent.  After  two  years  of  public 
management  its  gross  earnings  had 
increased  (in  1910)  to  $45,920,000,  and 
its  operating  expenses  to  $41,180,000 
—  a  rise  of  38  per  cent  in  the  latter; 
its  net  earnings  had  decreased  to 
$4,740,000  — a  decline  of  almost  66 
per  cent  —  and  its  operating  ratio  had 
risen  to  89  per  cent.  Complete  figures 
for  1911  are  not  available  at  this  writ- 


752 


GOVERNMENT  OWNERSHIP  OF  RAILWAYS 


ing,  but  it  is  expected  that,  when  they 
are  made  up,  they  will  show  a  still  fur- 
ther heavy  increase  in  expenses,  in- 
crease in  the  operating  ratio,  and  re- 
duction of  net  earnings. 

The  reduction  in  the  net  earnings  and 
increase  in  the  operating  ratio  were  in 
no  degree  due  to  changes  in  the  freight 
and  passenger  rates  charged.  The  gov- 
ernment made  no  reduction  in  them. 
Some  of  the  defenders  of  the  govern- 
ment's management  have  sought  to 
show  that  the  lines  were  in  bad  shape 
when  turned  over  to  it  by  the  company, 
and  that  the  enormous  increase  in  op- 
erating expenses  has  been  caused  by 
expenditures  to  put  the  lines  in  suit- 
able condition.  M.  Colson,  director  of 
roads  and  bridges  in  France,  —  a  gov- 
ernment officer,  —  who  knows  more 
about  railway  transportation  in  France 
than  any  other  man,  has  shown  in  an 
article  in  the  Bulletin  of  the  Interna- 
tional Railway  Congress  that  this  con- 
tention is  fictitious.  Nor  is  the  change 
due  to  improvements  in  the  service. 
No  additions  to  the  number  of  trains 
have  been  made,  irregularities  in  their 
running  have  increased,  and  the  gov- 
ernment has  in  many  cases  lengthened 
their  schedules.  There  has  been  an 
increase  in  the  number  of  bad  accidents, 
and  a  very  large  advance  in  the  claims 
for  damages  presented  and  paid. 

The  main  causes  of  the  heavy  aug- 
/  mentation  of  expenses  have  been  that 
the  government  dismissed  the  experi- 
enced officers  who  had  been  employed 
by  the  company  and  filled  their  places 
with  men  both  less  experienced  and  less 
capable;  that,  following  a  severe  strike, 
J  it  raised  the  wages  of  the  employees 
without,  however,  getting  any  more 
loyal  and  efficient  work  from  them; 
and  that  it  has  also  largely  increased 
the  number  of  employees.  The  last- 
named  has  been  the  principal  influence. 
The  increase  in  the  number  of  employ- 
ees has  added  three  times  as  much  to 


expenses  as  has  the  increase  in  their 
wages.  Under  the  management  of  the 
company  there  were,  for  example,  only 
1526  employees  at  the  central  admin- 
istration and  at  the  central  motive 
power  and  traffic  departments.  This 
number  has  been  increased  by  the  gov- 
ernment to  2587.  There  have  been 
large  additions  not  only  to  the  number 
of  employees,  but  also  to  the  personnel 
of  the  official  class. 

However,  the  causes  of  the  increases 
in  expenses  mentioned  are  secondary. 
They  are  all  themselves  effects  of  a 
single  primary  cause,  and  that  cause 
is  the  influence  of  politics.  France, 
formerly  a  monarchical  and  adminis- 
trative country,  has  now  become  a 
legislative  country;  and  the  govern- 
ment, in  the  management  of  the  West- 
ern Railway,  has  been  influenced  less 
by  a  desire  to  get  good  results  on  the 
railway  than  by  a  desire  to  get  sup- 
port in  the  Chamber  of  Deputies  and 
at  the  polls.  Meantime,  the  net  earn- 
ings are  insufficient  to  meet  the  in- 
terest on  the  capital  cost  of  the  rail- 
way, and  the  taxpayers  of  France  must 
make  good  the  deficit  which  is  growing 
greater  every  year. 

If  things  go  on  as  they  have  been 
going,  the  Western  Railway  will  soon 
be  in  the  same  plight  as  another  good- 
sized  railway  which  is  owned  and  oper- 
ated by  the  government  of  a  virtually 
democratic  country.  The  Intercolonial, 
owned  by  the  Dominion  of  Canada, 
seldom  earns  enough  to  pay  its  oper- 
ating expenses,  to  say  nothing  of  in- 
terest on  the  large  investment  in  it.  In 
1909  its  expenses  exceeded  its  earnings 
by  $449,535.  Interest  on  the  total  in- 
vestment at  3^  per  cent  was  $3,080,244, 
which,  added  to  the  deficit  from  opera- 
tion, made  a  total  loss  of  $3,529,779, 
which  the  tax- payers  had  to  make  good. 
In  1910  it  earned  $281,877  more  than 
its  operating  expenses,  but  as  interest 
at  3j  per  cent  on  its  capital  cost  was 


GOVERNMENT  OWNERSHIP  OF  RAILWAYS 


753 


$3,252,814,  it  really  incurred  a  net  loss  been  profitable,  and  the  rates  charged 

of  $2,970,937,    w;hich    the    taxpayers  are  still  much  higher,  and  the  wages 

suffered.  paid  still  much  lower,  than  those  on  the 

Each  political  party,  when  it  is  out  railways  of  the  United  States.    How- 

of  office,  charges  that  these  poor  re-  ycver,  results  gained  in  a  compact  coun- 
sults  are  largely  due  to  the  use  of  th^  try  having  only  3034  miles  of  railway, 

railway  for  political  purposes  by  the  can  hardly  yield  any  very  strong  argu- 


party  in  office;  and  the  charge,  whether 
made  against  one  party  or  the  other, 
seems  to  be  true.  It  has  been  repeated- 
ly alleged  that  the  administration, 
whether  of  one  political  complexion  or 
the  other,  usually  largely  increases  the 
number  on  the  pay-roll  when  an  elec- 
tion is  approaching.  While  the  state- 
owned  railways  of  France  and  of 
Canada  have  been  getting  such  poor 
results  the  privately-managed  railways 
of  both  countries  —  while  confronted, 
like  the  railways  of  all  other  countries 
of  the  world,  with  increasing  wages  and 
costs  of  materials  —  have  been  keep- 
ing their  expenses  within  reasonable 
bounds  and  fairly  maintaining  their 
net  earnings. 


ments  either  for  or  against  the  adop- 
tion of  government  ownership  in  the 
United  States. 

In  Austria,  where  the  state  operates 
about  8500  miles  of  line,  the  wages  paid 
are  somewhat  lower,  and  the  rates 
charged  somewhat  higher,  than  in 
Germany,  while  the  government  has 
to  make  good  from  taxes  a  deficit  of 
about  $25,000,000  a  year.  Before  the 
government  a  few  years  ago  took  it 
over,  the  Northern  Railway  of  Aus- 
tria was  paying  6  per  cent  dividends. 
M.  Pattai,  president  of  the  Austrian 
Chamber  of  Deputies,  and  a  friend  of 
government  ownership,  in  a  public  ad- 
dress, said  in  the  summer  of  1910:  — 

*  We  are  still  in  favor  of  the  principle,  ^/^^ 
but  it  does  seem  to  us  that  our  gov- 


It  may  be  hardly  fair  to  cite  the  rail 
ways  of  Italy  as  an  example  of  the 
results  of  government  ownership,  for 
they  have  been  an  operating  and  finan- 
cial failure  under  both  private  and 
public  management.  Certainly,  how- 
ever, the  most  enthusiastic  advocate 
of  government  ownership  would  not 
cite  their  results  as  an  argument  for  his 
cause.  Within  three  years  after  the 
government  in  1905  assumed  the  oper- 
ation of  the  Italian  lines  the  number 
of  employees  was  increased  fron  97,000 
to  137,000,  and  this  was  not  accom- 
panied by  any  increase  in  efficiency. 
The  opposite  seemed  to  be  the  case. 

Under  government  management  in 
Switzerland,  rates  have  been  reduced, 
wages  have  been  increased,  and  the 
service  given  has  been  more  or  less 
good.  It  is  a  disputed  point.  However, 
whether  financially  the  roads  have 
VOL.  no  -  NO.  6 


/ernment  has  performed  a  remarkable 
__ 


feat  when  it  has  succeeded  in  creating  a 
deficit  on  the  Northern  Railway.  The 
government  has  enlisted  an  army  of 
new  employees.  They  have  gone  much 
too  far  in  the  reduction  of  hours  of 
labor.  Instead  of  commercial  manage- 
ment, they  have  appointed  lawyers  to 
posts  that  required  business  men  or 
experts.  They  have  established  an  en- 
tirely impracticable  bureaucracy.' 


VI 

We  can  get  some  data  regarding  the 
results  of  public  ownership  and  opera- 
tion without  going  abroad.  The  gov- 
ernment of  the  United  States  about 
six  years  ago  acquired  the  Panama 
Railroad  and  the  steamship  line  owned 
by  it,  and  has  since  operated  them. 
During  the  last  ten  years  of  private 
ownership  the  ratio  of  the  operating 


754 


GOVERNMENT  OWNERSHIP  OF  RAILWAYS 


expenses  to  the  gross  earnings  of  the 
company  was  never  more  than  66  per 
cent,  and  during  the  last  year  of  private 
management,  1904,  it  was  less  than  63 
per  cent;  I  include  the  figures  for  the 
steamship  lines  as  well  as  for  the  rail- 
way. Immediately  after  government 
acquisition  the  operating  ratio  began 
to  increase.  In  1905  it  was  77.4;  in 
1906,  79.54;  in  1908,  74.49;  in  1910, 
71.4;  and  in  1911,  71  per  cent.  If  this 
bad  showing  had  been  made  when 
gross  earnings  were  declining,  it  would 
have  been  understandable,  but,  while 
the  gross  earnings  meantime  had  in- 
creased from  $3,267,859  to  $6,009,555, 
or  84  per  cent,  operating  expenses  in- 
creased from  $2,024, 181  to  $4,257,038, 
or  110  per  cent. 

The  gross  earnings  of  the  Panama 
Railroad  under  government  manage- 
ment were,  in  1911,  over  $80,000  per 
mile,  while  the  gross  earnings  of  the 
railways  of  the  United  States  were  but 
$11,553  per  mile.  The  operating  ex- 
penses of  the  Panama  Railroad  were 
almost  $50,000  per  mile  while  those  of 
the  railways  of  the  United  States  were 
less  than  $7700.  In  other  words,  the 
earnings  and  operating  expenses  per 
mile  of  the  Panama  Railroad  under 
government  management  were  each 
about  seven  times  as  much  as  those 
of  the  railways  of  the  United  States 
under  private  management,  although 
the  freight  traffic  handled  by  the 
Panama  Railroad  per  mile  was  only 
slightly  greater  than  that  handled  per 
mile  by  the  railways  of  the  United 
States.  Its  passenger  traffic,  however, 
was  about  four  times  as  great  per  mile 
as  was  that  of  the  railways  of  the 
United  States.  Its  net  earnings  were 
almost  $31,000  a  mile,  while  the  net 
earnings  of  the  railways  of  the  United 
States  in  the  fiscal  year  1910  were  less 
than  $3900  a  mile. 

The  explanation  of  the  large  gross 
and  net  earnings  of  the  Panama  Rail- 


road is  to  be  found  in  the  high  freight 
rates  that  it  charges.  Its  average  rate 
per  ton  per  mile  on  commercial  freight 
is  seven  cents,  or  nearly  ten  times  the 
average  ton-mile  rate  that  the  railways 
of  the  United  States  are  permitted  to 
charge;  while  the  rate  it  charges  the 
Isthmian  Canal  Commission  is  only 
about  two  cents  per  ton  per  mile.  Its 
average  rate  on  all  freight  is  4.14  cents, 
or  about  five  and  one  half  times  as 
much  as  the  average  rate  of  7.53  mills 
on  the  railways  of  the  United  States. 
Despite  these  facts,  the  Panama  Rail- 
road actually  made  some  advances  in 
its  freight  rates  in  the  autumn  of  1911. 
The  government  has  been  recon- 
structing the  Panama  Railroad,  and  it 
is  interesting  to  compare  the  cost  of  this 
work  with  some  things  that  have  been 
said  about  the  cost  of  construction  and 
the  capitalization  of  the  railways  of  the 
United  States.  Very  recently  a  promi- 
nent business  man  made  the  statement 
in  a  magazine  article  that  the  upset 
cost  of  railway  construction  under 
modern  conditions  is  $50,000  per  mile, 
denounced  the  capitalization  of  the 
railways  of  the  United  States  (amount- 
ing to  less  than  $63,000  a  mile)  as 
exorbitant,  and  advocated  government 
ownership  as  a  remedy  for  alleged  evils 
growing  out  of  over-capitalization. 
Now,  the  official  figures  introduced  at 
hearings  on  the  Canal  Zone  in  Decem- 
ber, 1911,  before  the  committee  of  the 
House  of  Representatives  on  Inter- 
state and  Foreign  Commerce,  show 
that  up  to  that  time  the  cost  of  recon- 
structing the  government-owned  Pan- 
ama Railroad  had  been  $167,000  per 
mile,  and  it  was  officially  estimated 
that  the  total  cost  of  reconstruction 
of  this  fine  would  amount  to  $226,190 
per  mile.  It  is  true  that  the  work  was 
done  under  peculiar  conditions  which 
necessarily  made  it  very  expensive, 
but,  on  the  other  hand,  the  figures 
given  include  no  outlay  for  right  of 


{ 


GOVERNMENT  OWNERSHIP  OF  RAILWAYS 


755 


way,  which  is  often  one  of  the  largest 
items  in  the  cost  of  railways  in  the 
United  States,  and  nothing  for  large 
terminals  in  great  cities,  for  land  for 
which  the  railways  of  the  United 
States  sometimes  have  to  pay  as  much 
as  $1,000,000  per  acre. 


VII 

The  adoption  of  public  ownership 
would  be  a  political  and  economic 
change  of  the  greatest  magnitude  and 
importance,  and  the  burden  of  demon- 
strating, by  a  clear  preponderance  of 
the  evidence  and  convincing  logic,  that 
the  result  would  be  of  public  benefit 
rests  on  those  who  favor  the  new  policy. 
They  have  not  shown  this,  nor  do  I 
believe  they  can.  They  claim  that 
under  government  ownership  wages 
would  be  higher,  rates  would  be  lower, 
service  would  be  better,  and  the  profits 


theoretical  argument  can  be  mads  to 
show  that  considerable  economies 
could  be  effected  under  government 
management;  but  the  inherent  and 
apparently,  to  a  large  extent,  incurable 
shortcomings  of  public  management 
cause  actual  wastes,  wherever  govern- 
ment ownership  obtjains,  that  greatly 
exceed  these  theoretical  economies,  and 
it  is  chiefly  due  to  this  that  most  state- 
owned  railway  systems,  instead  of  yield- 
ing a  profit  to  the  public,  usually  earn 
less  than  the  interest  on  the  investment 
in  them,  and  the  difference  has  to  be 
paid  from  taxes,  —  public  ownership 
thus  increasing  instead  of  diminishing 
the  burden  of  taxation. 

One  argument  advanced  is  that  the 
rates  fixed  under  private  ownership 
are  unfairly  discriminatory,  and  that 
we  must  change  to  public  ownership 
to  correct  this  evil.  But  there  are  now 
stringent  laws  in  the  United  States  for- 


from  the  railways  could  be  applied  in  ^^^idding  unfair  discriminations,  and  the 


mitigation  of  public  taxation,  but  the 
evidence  shows  that  under  private 
ownership  the  wages  paid  by  the  rail- 
ways of  the  United  States  are  the 
highest  in  the  world,  that  the  rates 
charged  by  them  are  the  lowest  in  the 
world,  that  the  service  rendered  by 
them  is  as  good  as  any  rendered  in  the 
world,  and  that  the  taxes  paid  by  them 
into  the  public  treasury  exceed  the  net 
profits,  after  interest,  paid  into  the 
public  treasury  by  any  state-owned 
railway   system   in   the   world.     This 


Interstate  Commerce  Commission  is  so 
enforcing  these  laws  as  to  correct  these 
discriminations  as  fast  as  they  could 
be  corrected  under  government  owner- 
ship. 

Again,  it  is  said  that  the  government 
ought  to  require  the  railways  to  remove 
the  influence  now  exerted  on  political 
and  governmental  affairs  by  railway 
corporations.  The  fact  is,  however,  that 
developments  of  recent  years  have 
practically  annihilated  the  political 
influence  of  railways  in  this  country. 


combination  of  facts  seems  to  demon-,,^^hile  under  government  ownership  the 


strate  that  our  railways,  under  private 
ownership,  are  the  most  efficiently 
managed,  in  the  interest  of  the  public,  in 
the  world.  What  good  reason  is  there 
for  believing  that  public  management 
here  would  be  more  efficient  than  pri- 
vate management,  when  the  latter  is, 
in  this  country,  more  efficient  from  a 
public  standpoint  than  public  manage- 
ment is  anywhere  in  the  world? 

I  am  aware  that  a  very  plausible 


efforts  of  political  parties  to  win  votes 
often  cause  them  to  make  and  to  carry 
out  promises  for  the  fixing  of  rates,  the 
building  of  extensions,  and,  especially, 
for  the  increase  of  the  wages  and  of 
the  numbers  of  railway  employees,  in 
practical  disregard  of  the  interests  of 
the  general  public,  which  alone  should 
have  any  weight  in  the  administration 
of  state  railways.  The  country  where 
the  influence  of  politics  on  state  rail- 


756 


GOVERNMENT  OWNERSHIP  OF  RAILWAYS 


way  management  seems  to  be  the  small- 
est is  Germany,  and  the  reasons  for 
this  have  already  been  shown.  Never- 
theless, Professor  Hugo  R.  Meyer,  in 
his  book  entitled  Government  Regula- 
tion of  Railway  Rates,  published  some 
years  ago,  demonstrated  with  the  great- 
est copiousness  of  illustration  that  while 
partisan  politics  does  not  affect  railway 
management  in  Germany,  the  adjust- 
ments of  rates  are  largely  determined 
by  sectional  struggles  and,  as  a  result, 
are  ill-adapted  to  commercial  and  in- 
dustrial needs. 

On  the  whole,  it  seems  to  me  — 
looking  at  the  matter  as  an  American 
citizen  rather  than  as  an  American 
railway  man  —  that  the  argument 
against  government  ownership  of  rail- 
ways in  this  country  is  overwhelming- 
ly conclusive.  The  evidence  that  I 
have  cited  (and  much  more  of  the  same 
kind  could  be  introduced)  indicates 
that  public  ownership  would  tend  to 
increase  rather  than  to  reduce  the  cost 
of  operation;  that  it  would  tend  to 
make  rates  more  inelastic  and  thereby 
injure  commerce;  that  it  would  lead  to 
efforts  by  the  political  parties  to  use 
the  railways  and  their  employees  for 
political  purposes,  which  would  result 
in  the  railways  and  politics  mutually 
corrupting  each  other. 

But  I  realize  that  political  action  is 
often  not  determined  by  the  statement 
and  analysis  of  facts,  and  that  our 
future  railway  policy  may  not  be  so 
determined.  It  is  unfortunately  true 
that  the  managements  of  our  railways, 
by  various  mistakes  of  both  omission 
and  commission,  have  lost  the  con-  ^i 
fidence  of  the  public;  that  many  lead- 
ers of  public  thought,  from  motives 
sometimes  good  and  sometimes  other- 
wise, have  fanned  the  popular  feeling 
against  them;  that  in  consequence  a 
system  of  regulation  which  unduly  in- 
terferes with  management  and  limits 
profits  has  been  adopted;  and  that  this 


combination  of  circumstances  may 
hurry  us  into  government  ownership 
unless  some  alternative  plan  be  adopted 
to  prevent  it. 

Some  acute  observers  who  have  de- 
tected the  drift  of  things  have  advo- 
cated different  plans  to  secure  satisfac- 
tory results  under  private  ownership 
for  both  stockholders  and  public,  and 
at  the  same  time  save  us  from  govern- 
ment ownership.  One  scheme  that  has 
been  suggested  is  that  the  railways  be 
allowed  so  to  adjust  their  rates  that 
each  can  earn  a  fair  return,  say  6  or 
7  per  cent,  on  a  fair  valuation,  and 
that  all  earnings  in  excess  of  this  be 
divided  between  the  railway  company 
and  the  public,  the  public's  share  being 
paid  into  the  government  treasuries  as 
taxes. 

This  plan  has  marked  advantages 
over  that  of  limiting  all  railways  to 
the  same  maximum  return.  If  every 
railway,  whether  well  or  ill  managed, 
were  restricted  to  the  same  return, 
there  would  be  no  incentive  to  good 
management,  while  allowing  the  bet- 
ter conducted  roads  to  earn  and  pay 
dividends  substantially  exceeding  the 
average  would  give  an  incentive  to 
good  management  of  all  railways.  The 
adoption  of  this  scheme  might  tend  to 
keep  up  rates,  because  each  reduction 
in  them  would  reduce  the  public's,  as 
well  as  the  railway's,  share  of  the  net 
earnings,  but  I  cannot  agree  that  ship- 
pers and  travelers  are  entitled  to  receive 
in  the  form  of  reductions  in  rates  all 
the  benefit  of  increases  in  the  efficiency 
of  railway  operation. 

Another  plan  that  has  been  outlined 
and  advocated  with  ability  by  W.  W. 
Cook,  the  eminent  authority  on  the 
law  of  corporations,  is  that  there  shall 
be  organized  by  the  federal  govern- 
ment a  great  holding  company,  on 
whose  stock  the  government  would 
guarantee  a  return  of  three  per  cent, 
and  which  would  acquire  a  controlling 


GOVERNMENT  OWNERSHIP  OF  RAILWAYS 


757 


part,  or  all,  of  the  securities  of  all  the 
railways.  The  first  board  of  directors 
would  be  appointed  by  the  President 
and  confirmed  by  the  Senate  of  the 
United  States,  and  its  members  would 
appoint  their  own  successors.  Mr.  Cook 
contends  that  this  scheme  would  have 
many  advantages  over  either  the  pre- 
sent policy  of  private  ownership  and 
government  regulation,  or  government 
ownership.  It  would,  he  says,  remove 
the  railways  from  the  influence  of  Wall 
Street  without  subjecting  them  to  such 
political  influences  as  probably  would 
dominate  them  under  government 
ownership.  He  assumes  that  the  direc- 
tors of  the  holding  company  would 
retain  the  present  officers  of  the  various 
lines,  who  have  been  chosen  because 
of  their  experience  and  skill  in  railway 
affairs,  and  that,  therefore,  the  roads 
would  be  as  efficiently  managed  as 
they  are  now,  and  would  be  more  effi- 
ciently managed  than  if  government 
ownership  were  adopted  and  they  were 
turned  over  to  political  appointees. 

It  seems  probable  that  the  first,  and 
almost  certain  that  the  succeeding,  di- 
rectors of  the  proposed  holding  com- 
pany would  be  chosen  for  political 
reasons,  and  that  they  would  be  influ- 
enced by  like  considerations  in  appoint- 
ing the  officers  of  the  railways.  Further- 
more, the  concentration  of  the  control 
of  all  of  the  railways  in  the  United 
States  in  the  hands  of  a  single  holding 
company  would  cause  a  concentration 
upon  it  of  the  demands  of  all  interests 
and  sections  for  readjustments  of  pas- 
senger rates,  freight  rates,  and  wages, 
and  for  the  provision  of  additional 
facilities  and  the  construction  of  new 
lines,  which  the  holding  company  would 
be  unable  to  meet;  and  the  resulting 
public  dissatisfaction  probably  would 
soon  lead  to  the  substitution  of  govern- 
ment ownership. 

A  short  time  ago  I  suggested  that  it 
might  be  desirable  for  the  government 


to  acquire  from  twenty-five  to  .forty 
per  cent  of  the  stock  of  the  railways, 
with  proper  representation  on  each 
board  of  directors,  so  that  it  would 
become  the  partner  of  the  present 
owners,  sharing  in  their  profits,  and 
also  in  their  losses,  if  any.  This  plan 
would  have  the  advantage  of  causing 
government  officials  to  look  at  the 
railway  business  from  the  standjx)int 
of  the  owner  as  well  as  from  that  of 
the  traveler,  the  shipper,  and  the 
wage-earner. 

Under  present  conditions  there  is  a 
strong  tendency  for  public  officials  to 
regard  themselves  as  the  champions  of 
all  other  classes,  against  the  owners; 
and  therefore,  in  spite  of  all  the  rail- 
way managers  can  do,  wages  and  the 
other  expenses  of  operation  increase 
faster  than  gross  earnings;  net  earnings 
are  so  small  as  to  offer  insufficient 
attraction  to  investors;  the  new  facili- 
ties provided  in  recent  years  have 
been  inadequate;  and  it  is  certain  that 
any  large  and  sudden  increase  of  traffic 
will  find  the  railways  unable  to  cope 
with  it.  If  the  government  were  a 
stockholder  and  had  representatives 
on  the  boards  of  directors,  whatever 
affected  net  earnings  would  affect  the 
stock  of  the  government  as  well  as  that 
of  private  individuals,  and  the  public, 
and  public  authorities,  would  be  better 
able  to  appreciate  the  railways'  finan- 
cial needs  than  they  are  now. 

Undoubtedly  the  best  course  will  be  \>^ 
to  leave  the  ownership  of  the  rail- 
ways entirely  in  private  hands  and 
follow  a  policy  of  firm  but  vnse  regula- 
tion. We  have  not  succeeded  yet  in 
working  out  and  adopting  such  a 
policy.  Most  of  the  legislation  for  the 
regulation  of  railways  has  been  con- 
ceived in  prejudice,  or  drafted  in  igno- 
rance. It  used  to  be  contended  that 
certain  forms  of  government  regulation 
must  be  adopted  as  alternatives  to 
government   ownership.    It   is  to   be 


758 


GOVERNMENT  OWNERSHIP  OF  RAILWAYS 


feared  that  they  may  prove  to  be  pre- 
cursors and  causes  of,  rather  than  alter- 
natives to,  government  ownership.  But 
if  the  public  and  public  men  will  but 
give  the  subject  the  intelligent,  fair, 
serious  consideration  it  demands,  the 
fatal  plunge  into  public  ownership  may 
be  avoided. 

Fair  and  intelligent  consideration 
would  result  in  the  concentration  of 
authority  over  the  railways  in  the  hands 
of  the  Interstate  Commerce  Commis- 
sion and  the  abolition  or  subordina- 
tion to  the  Interstate  Commission  of 
the  numerous  state  commissions,  with 
their  multitudinous,  conflicting,  vex- 
atious, and  costly  requirements.  It 
would  result  in  the  appointment  of 
well-paid  experts  and  scientists,  both 
to  membership  on  the  commissions, 
and  to  the  various  important  and  re- 
sponsible positions  under  them.  It 
would  result  in  public  authorities 
ceasing  to  try  to  substitute  themselves 
for  the  managers  of  the  railways,  and 
becoming  content  to  perform  their 
proper  duty  of  holding  the  managers 
responsible  for  the  effects  of  their 
management  on  the  public  interests. 
It  would  result  in  no  diminution  of  the 
efforts,  growing  everyday  more  success- 
ful, to  suppress  all  forms  of  unfair  dis- 


crimination by  railways;  but  it  would 
result  in  a  diminution  of  the  incessant 
and  successful  efforts  to  hold  down 
railway  profits  —  efforts  which  are  re- 
pelling capital  from  the  railway  busi- 
ness, and,  by  preventing  adequate 
increases  of  facilities,  imperiling  the 
welfare  of  every  manufacturer,  every 
merchant,  every  farmer,  every  wage- 
earner,  in  the  country.  One  thing  is 
certain,  and  that  is  that  we  cannot 
long  continue  to  muddle  along  as  we  are 
doing  now.  W.  M.  Acworth,  the  emi- 
nent English  authority  on  railway 
affairs,  after  a  visit  to  this  country, 
said  in  an  article  published  last  autumn 
in  the  Bulletin  of  the  International  Rail- 
way Congress:  — 

*If  I  have  an  individual  belief  it  is 
that  the  United  States  will  get  much 
nearer  to  the  brink  of  nationalization 
than  they  have  come  at  present,  and 
will  then  start  back  on  the  edge  of  the 
precipice,  and  escape  by  some  road  not 
yet  discernible.' 

The  best  road  by  which  we  may  es- 
cape is  a  conservative,  wise,  just  policy 
of  regulation;  and  the  most  vital  ques- 
tion of  our  time  is  whether  the  people 
of  the  United  States  will  be  just,  wise, 
and  conservative  enough  to  take  that 
road. 


SEP  17 1915 

*-^fi  6   J9I6 


iW/lfi 


28  1931 


